Pre-IPO Companies Considering an IPO or Embarking on Their IPO Journey
For private companies looking to grow and build their business, initial public offerings (IPOs) are still a great way to raise money for future expansion, and can be achieved without the potential restrictions or loss of control that can come with taking investment from private equity funders / funds.
There has been a coordinated effort by the UK government, regulators, the London Stock Exchange (LSE) and the Aquis Stock Exchange (Aquis) to boost London’s appeal and attract and retain listings with a further reform agenda to come in 2025. London is still open for business for companies that are considering an IPO as an option, but what can they do to better prepare themselves and / or to get a head start in the IPO process?
As such, we will look at some of key considerations and guidance for Pre-IPO companies that are considering an IPO or are currently embarking on their IPO journey.
CHOICE OF MARKET
It is important at an early stage for companies to carefully consider the choice of market to list on in London. There are different exchanges and markets available to companies and it’s important to consider the suitability of these listing options for your company.
An important differentiator for companies is the listing requirements. For example, the main market on the LSE has a minimum market capitalisation requirement of £30 million, whereas AIM has no minimum (although an appropriate amount must be agreed with your AIM adviser / Nomad). Similarly, Aquis’ main market has a minimum market capitalisation of £30 million, whereas on the Aquis Growth Market they have a minimum market capitalisation of £10 million on its Apex segment and £2 million on its Access segment.
There are various other reasons and listing considerations to consider when choosing the right market for your company but, as can be seen, it’s important to carefully decide which market will suit your company and better position it to help it grow.
For more information on the listing requirements on Aquis and the LSE, please see our listing guides linked here - AIM and Aquis
CORPORATE STRUCTURE
Corporate structure is a key consideration that should be discussed early by any companies considering or looking into an IPO. The importance of this is that if your company needs to implement restructuring to be suitable for an IPO, the earlier this is implemented the better.
The importance of the corporate structure is because a UK private limited company cannot itself be listed, as private companies in the UK cannot offer their shares to the public.
As such, a company looking to IPO will need to review their corporate structure and figure out whether they need to go through the process of re-registering the private company as a public limited company or whether they need to incorporate a holding company to be the actual ‘listed vehicle’. This is commonly referred to as a ‘Topco’.
There are pros and cons to both options and the decision will ultimately depend on the company’s existing corporate structure and business, and what will make sense for the company going forward. For example, in our experience, a Topco is often the choice for international companies looking to list in London as it can make things simpler from an English law perspective by having a UK incorporated company as the listed entity.
The key again is to consider your corporate structure at an early stage and figure out what makes sense for your company and its business. The work with your legal advisers to implement that restructuring should be started as soon as practicable.
HOUSEKEEPING & OTHER PRE-IPO
Another important consideration for Pre-IPO companies is their legal housekeeping. A very common issue we encounter with companies considering or preparing for an IPO is the need to tidy up their company’s corporate and commercial documentation. In particular, early-stage companies or companies growing rapidly often need some help tidying up things such as unsigned agreements, commercial contracts or their corporate statutory books and records.
A common example of this is when a company has a contract with a material supplier or client and the contract is unsigned. There may be clear evidence of the company and its client abiding by the terms of the contract, but this can be a material risk for the company and something that needs to be cleaned up prior to IPO. The reason for this is that the company will need to disclose its material contracts in its Admission Document or Prospectus and if those material contracts are unsigned, it would be flagged as a risk and would likely be unattractive to investors. Depending on how material the contract is, this could hurt the company’s IPO and / or fundraising (if they are fundraising on IPO).
INVESTOR RELATIONS
Engaging with investors throughout your IPO journey is vitally important to securing success. You will need to consider existing investors who are embarking on the next stage of your journey with you and new investors joining you as you become a publicly traded company. Effective investor relations go beyond your regulatory requirements to provide open dialogue with all types of investor groups as your company grows. Companies should utilise an extensive range of channels to engage with investors and actively promote methods of engagement.
PUBLIC RELATIONS
Securing visibility of your investment case during your IPO and beyond is vital to ensuring you meet your initial capital raising targets and your equity trades with ample liquidity after the listing process is complete. Setting out clear goals and communicating these to the wider investment community should be an integral part of planning for your IPO. The evolution of media and news distribution means companies have never had as many channels to engage with the investment community. However, implementing an effective PR strategy in the world of social media and digital information consumption requires meticulous planning and execution.
HOW LAYTONS ETL & UK INVESTOR GROUP CAN HELP
Laytons ETL is a full-service commercial law firm headquartered in the City of London which services UK and international clients and is a member of ETL GLOBAL, a multinational professional services group. Our Equity Capital Markets team is experienced in advising clients in the context of IPOs and equity capital markets transactions here in London. If you would like to discuss a London listing, or need any further guidance, please contact the Laytons ETL Equity Capital Markets team.
UK Investor Group provides a vertically integrated public relations and investor relations service, laser-focused on the outcomes for its clients and their stakeholders. The UK Investor Group team delivers strategic advice on IR and PR and utilises its proprietary channels to communicate its clients’ investment cases to a broad range of investors. Please contact the UK Investor Group team for further insight into its unique vertically integrated PR and IR service.
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Disclaimer: This publication is provided by Laytons LLP for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to your regular contact at Laytons LLP or Laytons’ Equity Capital Markets team. For any investor relations or public relations related enquiries contact John Casey at UK Investor Group.
